Paul Wallbank – Brilliant Communications

Category: banking

  • Stripe joins the unicorns

    Stripe joins the unicorns

    Payment service Stripe joins the unicorn club as credit card company Visa becomes the latest investor reports the Re/Code website.

    Two years ago this site interviewed John Collison, one of the Irish twins who founded Stripe about their mission to bring the payments industry in the 21st Century.

    With the Visa investment it now means two of the world’s three major credit card companies are investors in Stripe, the other being American Express, and this shows the incumbent players are acutely aware of the changes happening in the payments world.

    That credit card companies are investing in the businesses that threaten to disrupt their industry indicates the incumbents’ savvy management; while there are cultural and ethical barriers in trying to undercut the existing profitable products, having a stake in the new competitors gives companies like Visa and AmEx to remain relevant in a post credit card world.

    For Stripe, investment from what could have been their major competitors not only takes some of the pressure off the the business but also opens opportunities for technology sharing and access to bigger markets.

    Probably the most important thing for Strip with the Amex and Visa investments is they legitimise the business and the entire payments startup sector. It’s an important vote of confidence in the technologies and market.

    For the Collison twins it also helps build better businesses, as John told Decoding the New Economy two years ago, “if we just building a business to take transactions from PayPal and get them onto Stripe, that’s not that interesting. What is interesting is if we can create new types of transactions that would not have existed otherwise.”

    “By providing better infrastructure for anyone to build a global business. That will change the kind of things people will build.”

    Now more people will be looking at what they can build on these payment platforms.

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  • Data driven lending

    Data driven lending

    Banking has always been a data driven business, understanding borrowers and the risks they present is one of the essential skills in making money from lending.

    The new wave of payment startups present a new way for lenders to analyse risks; with real time data aggregated across businesses and regions, lenders can quickly decide wether a borrower is likely to able to pay the money back with the conditions asked for.

    Payments company Square in its latest pivot has partnered with Victory Park Capital and claims to have extended more than $100 million in capital to more than 20,000 merchants writes the New York Times.

    Like other payment companies that have entered this market, Square uses their own deep understanding of their customers’ incomes to be able to make a data based decision on the creditworthiness of applicants.

    Square also offers ancillary data-driven products created for small businesses. The new instant deposit product, which is still in testing and will be fully available in the spring, will give businesses faster access to money they put into a debit account. And the company’s new charge-back protection service will cover some disputes between consumers and merchants.

    Those products also rely on data that Square has collected. They will be available only to small businesses that have a solid financial track record, based on a history of accepting payments with Square.

    Square is by no means the first business to do this, last year we wrote of PayPal’s move into small business lending and Point of Sale hardware manufacturer Verifone retreated from the market two years ago calling it ‘fundamentally unprofitable.’

    The competition in the space and the fact assessing financial risks isn’t exactly a core competence of Silicon Valley start ups indicate Square’s and other companies may find small business lending a tough business as well.

    Despite that, small business lending is a field that is overdue for disruption. With companies like Apple, Google and Amazon all offering payment services, the logical expansion is into evaluating risk and profit.

    It may not be Square, Verifone or PayPal who ultimately redefines the sector, but it will be one of today’s tech businesses that does.

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  • Carbanak raises the information security stakes

    Carbanak raises the information security stakes

    “The most sophisticated attack the world has seen to date” is how Kaspersky Lab’s North American managing director Chris Doggett describes the massive Carbanak electronic bank fraud that could have cost victims up to a billion dollars.

    Using a range of techniques, the Carbanak gang cracked their targets’ networks, right down to monitoring financial firm officers through their computers, and stole money through through the banks’ own ATM networks.

     

    “That’s where the money is.” Was 1930s bank robber Willie Sutton’s response to being asked why he robbed banks and that is what’s driving the Carbanak gang.

    For every Willie Sutton or Carbanak gang there’s a million opportunistic street muggers and script kiddies looking for stealing a few dollars from weak targets though and this is what the average small business or individual needs to be careful about.

    Last week Kaspersky reported that nearly a quarter of all phishing attacks targeted financial data. The amounts being stolen are minuscule compared to Carbank’s ill gotten gains but far less work is required to crack a home or small business account.

    For any large organisation that hasn’t learned from the Sony or Target hacks, the Carbank heist should be warning that information security is now a responsibility of executives and boards. All of us though have to take care with our data and systems.

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  • Will mobile banking drive the developed world’s economies?

    Will mobile banking drive the developed world’s economies?

    Microsoft founder Bill Gates suggests mobile banking can revolutionise developing nation’s economies says in a guest post for online magazine The Verge.

    “People being able to participate on their phone, no matter where they live, even if they’re in a remote rural village in Tanzania or Kenya, they’ll be able to save small micro-payments,” Gates told The Verge during an interview in New York. “They can participate on the economy through their phone, but also in the fall when it’s time to pay the school fees, they’ve saved the money for the year. That’s transformative for their family.”

    Gates’ piece appeared at the same time French telco Orange announced a partnership with Ecobank to provide mobile payments in several African countries.

    Bringing banking to the masses through mobile phones is one example of how emerging markets can leapfrog the technological and institutional barriers that have given the western world a head start.

    For poor and remote communities, a combination of cheap photovoltaic (PV) cells and cellular base stations mean it’s possible to connect into the global economy without the need of massive government or corporate investment.

    As Gates points out, this has the potential to dramatically change the economies of many emerging markets.

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